The Laval case has reverberated throughout Sweden and the whole of
Europe over the past few years. It began when the Swedish Building
Workers’ Union blockaded the site of a school in Vaxholm after the
contractor, the Latvian construction company Laval un partnerei Ltd,
refused to sign a collective agreement with the union on their terms.
The conflict forced the Latvian workers to leave for Latvia, and the
company went bankrupt.
The case ended up in the Swedish Labour Court (AD).
It established that the union’s industrial action was in line with
Swedish labour law, but that it could be in breach of EU law. When a
Swedish court deals with interpretations of EU law in cases that are
unclear, it should request a preliminary ruling from the Court of
Justice of the European Union on how EU law should be interpreted. The
Swedish Labour Court sent a long list of questions to the Court of
Justice which in particular dealt with the interpretation of the EU
Directive on Posted Workers and the issues related to the so-called Lex
Britannia. Lex Britannia is a section in the Co-Determination Act which
states that a Swedish union can take industrial action against a
foreign company even if the company is bound by a foreign collective
agreement.
Act II was played out in the Court of Justice of
the European Union, which issued its judgment on 17 December 2007. It
concluded the Swedish implementation of the Directive on Posted Workers
was grossly inadequate and that the industrial action had been in
breach of EU law. The court concluded the case in some detail, and the
Swedish government launched a major Laval inquiry to revise its
legislation to fulfill the demands of EU law. The inquiry has resulted
in a bill which should come into effect on 1 April 1010.
Act III was played out in Sweden’s Labour Court,
which continued to handle the case. It was clear that the employer side
and Laval would win the case, but there still remained several
questions for the court to answer. The most important was who would be
liable for damages. Would the union be liable for damages incurred as a
result of the industrial action?
The demands in the court
Laval had now increased its demand for damages
after making headway at the Court of Justice of the European Union.
They now demanded close to three million kronor (€300,000), in damages
from the opponent plus litigation expenses.
The main issue of principle was whether one party,
a union, could become liable for damages for having broken EU law by
taking industrial action in breach of EU rules. The employer side was
of the opinion that damage liability was applicable, supported by both
the Swedish Co-Determination Act (after the Court of Justice of the
European Union had nullified the so-called Lex Britannia) as well as EU
law.
The Swedish unions contested the claim for damages.
They admitted that the industrial action was in breach of EU law, as
the Court of Justice of the European Union had established. But they
refused damage liability based on two things. Firstly they said there
had been no breach of Swedish law because it had been followed in the
shape it had when the industrial action took place. Therefore it was
the Swedish state, and not the union, which had failed by upholding a
law (Lex Britannia) which was in breach of an EU treaty.
Secondly the union said it could have no damage
responsibility with basis in EU law, as there was no case law and also
no damage liability which would efficiently guarantee legal protection
for the employer.
A split court
A majority of the seven judges (four judges) in the
Labour Court felt the Court of Justice of the European Union’s judgment
should be given retroactive effect, so that damages could be imposed
even though the union could have acted in good faith regarding the
legality of their actions when they were taken. Furthermore, the court
thinks general principles on state damage liability in cases of breach
of EU law can also be applied to individuals. The court sentenced the
union to pay 700,000 kronor (€70,000) in damages as well as 2.1m kronor
(€210,000) in litigation costs – a total of more than 2.8m kronor
(€280,000). The demands for economic compensation, however, is refused
because Laval has not been able to prove the size of its loss.
The minority of the judges (three judges) felt that
the majority had hardly interpreted EU law correctly when issuing their
ruling on the damage responsibility, and that in this case there was no
need whatsoever to make a decision on damage liability because the
legal position had been so unclear that damage liability in any case
should be dismissed. So the minority did not wish to rule in favour of
damage liability. The minority was also of a slightly different opinion
on the sharing of court costs.
This judgment is important as principle. For the
first time in EU history a union has been sentenced to pay damages for
illegal industrial action, and somewhat paradoxically it is the Swedish
Labour Court which has been leading the way in this respect. The
judgment is highly controversial. According to EU law a national court
must request advance notification when a question concerning the
interpretation of EU law is unclear. It is impossible to understand how
the court’s majority can perceive the question to be clear, when
qualified judges within the court are of a different opinion. The
majority should have requested a preliminary ruling from the Court of
Justice of the European Union and awaited an answer before passing its
judgment.
What happens after the
judgment?
It will be interesting to watch the reaction from
Swedish unions. There is always the chance they will claim state
compensation for the damages they have suffered because the Swedish
Labour Court unilaterally concluded in the matter and because the
damage was caused as a result of an incorrect implementation of EU law
– which the Swedish state is responsible for. All indicators point to
no curtain fall after act III in the Laval case, but a few more acts
will be seen before this case is closed.
